9/20/2004 @ 12:00AM

Almost Out of the Woods

Scott Crump toiled for years to perfect a cheap machine that whips out 3-D prototypes. The hard work is finally paying off.

Scott Crump has spent most of his life fixing busted machines. A tinkerer at 14, Crump traded the gearbox of a riding lawn mower for an errant Morris Minor auto salvaged from a harbor in Bridgeport, Connecticut. After dismantling its brake drums, carburetor, motor head and oil pan to sand off the rust, he gave the refurbished car to his mother in exchange for lifts on his newspaper route. Later, in high school, Crump spruced up seven junker Volkswagens and sold them for $400 to $600 apiece. “It beat working at McDonald’s, and I did that for a year and a half,” he says.

Now, at age 51, Crump is overhauling the Eden Prairie, Minnesota company he started in 1988. Stratasys makes boxy machines that turn digital drawings into life-size prototype parts within a few hours.

Taking its cues from computer-aided-design software, an extruder stacks thin layers of gooey thermoplastic that cure into shape. The parts–as large as 2 feet on a side and accurate within five-thousandths of an inch (about twice the diameter of a human hair)–give more substance to sales pitches and reveal flaws earlier in a product’s design.

Along the way Crump developed a few kinks of his own. Stratasys survived early on by peddling refrigerator-size versions at $300,000 apiece to the likes of GM, 3M and Pratt & Whitney. It stumbled when it tried to launch a smaller, office-friendly 3-D printer–price tag: $55,000–aimed at a larger universe of machine shops, industrial designers and engineering schools. The first 300 machines swarmed with so many bugs that Crump had to cancel production twice in five years.

Good thing he had the brains–and the perseverance–of his old man. A chemical engineer with an entrepreneurial itch, Ralph Crump had a hand in starting or backing eight companies. Among them: Frigitronics, maker of ocular diagnostic equipment (bought by Revlon for $114 million in 1986), and Osmonics, a water-filtration outfit (acquired by General Electric for $270 million). Despite dad’s success, “it was made very clear that we kids would need to grow our wealth the old way, by earning it,” says Scott.

That he did. Crump studied mechanical engineering at Washington State University before starting his own company, an oddball maker of automated packaging machinery and large electronic scales. Still he continued to dabble. In 1998 he set out to make a toy frog for his 2-year-old daughter. Using a handheld glue gun, and armed with a home-cooked slurry of polyethylene and candle wax, he built the shape layer by layer. After burning through 13 weekends and $10,000 on digital-plotting equipment, Crump’s wife, Lisa, declared: “Quit or incorporate!”

In 1991, after courting scores of venture capitalists, Crump gave up 35% of Stratasys to raise $1.2 million–just enough (along with $264,000 from selling stakes in various family holdings) to build five large machines. About a year later IBM began developing a small 3-D printer with an extrusion mechanism eerily similar to Crump’s patented design but with a different feeding system. Rather than wrangle in court, Crump convinced the big company–in exchange for $500,000 and 500,000 Stratasys shares–to codevelop a low-end machine called Genisys.

IBM’s design involved feeding small plastic wafers into a heated pump that melted them and pushed the goo through an extruder. It worked–sometimes. Other times the nozzle plugged up, the wafer loader jammed or the platform on which the prototype was formed slammed into the extruder. Crump halted production in 1998, but not before 150 units had made it out the door.

One big problem turned out to be contaminated wafers. Some melted at such high temperatures that unmelted pebbles blocked the extruder nozzle. Crump changed suppliers, tightened manufacturing tolerances on the pellet feeder and replaced the erratic sensors used to control the platform. As the next 150 machines rolled out, reliability improved, but not nearly enough. Production stopped again in 2001. “We spent I don’t know how many hours [in the field] to keep these products operational,” says Jonathan Cobb, vice president of the 3-D-printing unit. “Customers didn’t want the hassle.”

By early 2002 Crump had shelved IBM’s wafer feeder altogether. Instead of wafers, he used spools of plastic filament fed through a heated rod, eliminating many components that were too expensive to manufacture. (IBM has since sold its stake in Stratasys.) “In hindsight [our mistakes] look pretty dumb,” says Crump. Adding up what the company paid for IBM’s technology, the research and engineering costs, as well as on-site troubleshooting, “this was a $10 million lesson.”

Result of all the reconfiguration: a $24,900 machine called Dimension. Crump claims it will run glitch-free for 3,000 hours–a sixfold improvement over the original Genisys–based on a test involving 22 machines running round the clock for two years. Davis Aircraft Products, an engineering company in Bohemia, New York, used one to design a blade-folding device for Apache helicopters; the multicomponent system allows the birds to fit on transport planes without having to remove, reattach and realign the blades, a lengthy process. Says Vice President Douglas Davis: “The machine paid for itself on this one job.”

Last year Crump sold 500 3-D printers–more, figures industry tracker Wohlers Associates, than the combined sales of his three top competitors in the $580 million industry of rapid-prototype machines and parts. For the six months ended June 30 net income was up 59% from a year ago to $4.3 million, on sales up 46% to $33.2 million. A good chunk came from 3-D printers. The bulls who have sent Stratasys shares to $26, or 32 times trailing earnings, see endless potential here. There are 1.7 million 3-D CAD programs in use. If 1 in 20 gets a 3-D printer (at Davis Aircraft, the ratio is 1 in 4), Crump’s potential market, at $25,000 a pop, would be $2 billion.